Managing my young son's inheritance

FinanciallyPerplexed

I've already posted about this on the Marriage, Relationships and Families forum. A respondent has suggested that it really belongs here.

My wife died recently (we were separated), and my fifteen year old son will inherit a decent amount of money from her pension (60K+) and a share of the home he currently lives in (30K). He will have access to the cash part when he turns 16, in four months. The remainder of the pension and a share of the house will also go to his 20 year old twin siblings.

I'm after advice on how he should manage and invest his money so that a) it works for him and b) he is unable to blow it in the (unlikely) event that he goes off the rails.

atush

At 16, I would start with ISAs. So S&S isas, and a Jisa.

Keep some in a cash account for his spending.

theoretica

Will the home be sold? So £90k cash, or will that portion remain tied up in property?

FinanciallyPerplexed

Thanks.

He's a bright lad and has, independently, already thought of ISAs.

Will the home be sold? So £90k cash, or will that portion remain tied up in property?

Here it gets complicated. The property will be held as a half share by me and three 1/6th share by him and his 20 year old siblings. We don't know when we'll sell - but possibly after the elder two graduate in '19.

ValiantSon

FinanciallyPerplexed wrote: »

I'm after advice on how he should manage and invest his money so that a) it works for him and b) he is unable to blow it in the (unlikely) event that he goes off the rails.

Little to nothing you can do about that, beyond try to educate and counsel him on the best way to manage his money. His money belongs to him and you can't stop him doing what he wants with it. While it may be hard, you have to let your children make their own mistakes (or not).

Eco_Miser

FinanciallyPerplexed wrote: »

... he is unable to blow it in the (unlikely) event that he goes off the rails.

As various posts here and on other boards show, it is impossible to lock your own money away from yourself on a long-term basis. A pension is locked until 55, fixed term bonds for up to 5 years (possibly longer?). Everything else can be got at by a determined person willing to accept a penalty for early withdrawal.
Hopefully your son won't go off the rails, and there won't be a problem.

xylophone

Does he have a Junior Stocks and shares ISA?

Start now with maximum for 17/18 and continue after April 5th.

https://www.vanguardinvestor.co.uk/investing-explained/stocks-shares-junior-isa

http://monevator.com/using-vanguard-lifestrategy-funds-life/

He can continue with this in the future when it becomes an adult ISA.

Nationwide Smart current account, to gain access to Smart Limited Access Saver and Smart Regular saver.

https://www.nationwide.co.uk/products/savings/our-savings-accounts/all-savings-accounts

Santander mini?

https://www.santander.co.uk/uk/current-accounts/123-mini-current-account

He might consider starting a pension - even with no relevant earnings he can contribute up to £2880 and tax relief of £720 will be claimed.

https://www.legalandgeneral.com/pensions-retirement/stakeholder-pensions/stakeholder-pension-for-children/

His share of the house sale can be saved or invested until he needs it for a home of his own.

greenface

FinanciallyPerplexed wrote: »

b) he is unable to blow it in the (unlikely) event that he goes off the rails.

At aged 50+ with both parents but knowing people who have lost a parent in their teens . He sound a sensible lad but keep an eye on him (them all) difficult times ahead . sorry for your loss

FinanciallyPerplexed

Some good suggestions, Xylophone. Thank you.

kidmugsy

Once he's 18 opening a LISA would probably be a good idea. Once he's well into his twenties he could use the money towards his first house purchase.

Afterthought: UNLESS the fact that he now owns part of a house excludes him, and I dare say it does. You'd want to check.

Secondly: I'm a great sceptic about the wisdom of investing in pensions without an employer's contribution, especially for somebody of an age to want to buy (say) a house and a car within the next dozen years.

Hold on: is the money from her pension his share of a DC pension? Because if it is surely he can just keep it as a pension but one that has the special characteristic that he can drawdown money whenever he wants and it will be tax-free (assuming that your wife was younger than 75 when she died).

kidmugsy

Another possibility: when the twin siblings want to leave the house your son uses his £60k to buy out their shares of the house. Then you and he own it half and half. You let it out and he gets his share of the rent tax-free by virtue of his personal allowance against income tax. Do you see any merit in that?